Out of Control Policy Blog

Yet More Nickle-n-Diming of California Taxpayers

Ouch—as if the numerous tax and fee increases adopted by policymakers earlier this year weren't bad enough for California taxpayers, now there's yet another hand picking their pockets. This time though, it's not coming from big-spending policymakers—it's the byproduct of simple math.

Like most states, California automatically adjusts its tax brackets every year to account for inflation. As the Los Angeles Times reports today, the state's negative inflation this year will have the effect of lowering the income levels that trigger each marginal tax rate, bumping many unfortunate taxpayers on the margins into a higher tax bracket:

While Californians are still feeling the sting of income and sales tax hikes signed into law earlier this year, now comes news that state tax authorities plan to take a little more from their pockets.

For only the second time in 30 years, the tax board is lowering the point where each tax bracket begins, bumping many people into a higher category. At the same time, officials are cutting back some deductions. Everyone will pay more, even people whose bracket or income doesn't change. [...]

The new changes apply to the 2009 tax year. Residents are already paying hundreds -- even thousands -- of additional income tax dollars under the quarter-point rate increase and other tax hikes approved in February as part of a budget deal.

"Everything is going up, up, up," said Othman Rabie, owner of a sandwich shop in downtown Sacramento. "And business is going down." [...]

Under the latest changes, for a married couple filing jointly, the top tax rate of 9.55% now begins at $92,698, down from $94,110. Combined with the earlier increases, such a couple with two children, earning $100,000, will see their California income tax bill rise by 22.3%, or $716, according to the state Franchise Tax Board. Their tax would go from $3,208 to $3,924, factoring in a $110 drop in the standard deduction for joint returns.

The last thing California needs is yet another blow to economic prosperity. I haven't heard similar news yet from other states, but I think it's safe to say that it won't just be Californians going through this.

» Reason Foundation's California Research and Commentary

Leonard Gilroy is Director of Government Reform


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